Microsoft and RIM BlackBerry Take on Google with Search Deal

May 13th, 2011 by Trefis Team
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Microsoft (NASDAQ:MSFT) recently announced a search partnership with Research in Motion (NASDAQ:RIMM) in which the Bing search engine will become the default search on BlackBerry devices. [1] Microsoft mainly competes with Google (NASDAQ:GOOG) in the search advertising market, while RIM competes with Apple (NASDAQ:AAPL), Google and Nokia (NYSE:NOK) in the smartphone operating system market. With Google being a common competitor for both Microsoft and RIM, could this partnership be aimed at countering Google’s increasing presence in search and mobile markets?

We currently maintain a $29.62 price estimate for Microsoft stock, which implies a premium to market price.

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A Win-Win Situation for Microsoft and RIM

A few weeks back, Microsoft announced its partnership with Nokia in which Windows Phone 7 will become the main operating system on Nokia’s smartphones (see Nokia Partnership Provides Upside for Microsoft Stock). These partnerships by Microsoft are clearly aimed at increasing the presence of Bing search, as Google still remains the dominant search player.

Partnership with Microsoft also benefits RIM – by leveraging Bing, RIM doesn’t need to devote resources to search efforts, and can use those resource in improving its own smartphone operating system. According to a Comscore report, Google Android and Apple OS are still gaining market share in the U.S. smartphone subscriber market, while RIM recently lost market share. [2]

The market share results suggest that RIM desperately needs to bring innovative products to the market to stem the decline and revive its fortunes (see RIM Continues to Lose Ground in Smartphones).

See our complete analysis for Microsoft stock here

Notes:
  1. Wall Street Journal: Microsoft CEO Steve Ballmer appearance at BlackBerry World, May 3rd 2011 [↩]
  2. Comscore U.S. smartphone subscriber report, May 6th 2011 [↩]